New Homes Building Down Despite Rate Cut?

New homes starts plunged in the first three months of the year despite two rate cuts from the Reserve Bank in at the end of last year.

Dwelling starts tumbled 12.6 per cent in the first three months of the year, following a 6.9 per cent drop in the final quarter of 2011, according to the Australian Bureau of Statistics. Analysts had tipped a 2.3 per cent fall.

On an annual basis new home starts tumbled 24.5 per cent, the ABS said.

“It’s a very disappointing number,” said Moody’s Economy.com analyst Katrina Ell. “It shows consumers are still very cautious and the housing market is still very weak and we haven’t really seen the stimulatory impact of the rate cut coming through.

“Usually with a rate cut we would expect to see some sort of increase in consumer sentiment which would encourage buyers back into the market … but we haven’t seen that at all.

“Total dwelling units fell to 30,623 in the March quarter, the ABS said. New private sector houses sank 7.8 per cent to 20,306 in the March quarter, while other residential buildings tumbled 21.6 per cent in the quarter to 9492, on seasonally adjusted terms.

Dwelling starts collapsed by 37.4 per cent in New South Wales, and 8.3 per cent in Victoria, on a seasonally adjusted basis. In Queensland they rose 2.5 per cent, while in Western Australia they sank 4.8 per cent, the ABS said.

The dollar hardly budged on the news and is currently hovering around $US1.017.

The RBA cut interest rates twice in November and December, by 25 basis points both times, to perk up the patchy domestic economy.

The housing sector, however, has continued to weaken, with home prices sliding 2.2 per cent since January, or 5.5 per cent in the year to May, according to RP Data.

The RBA continued cutting interest rates this year and has cut the cash rate altogether four times since last November for a total of 125 basis points, leaving the official cash rate at 3.5 per cent this month.

With the shortage of new homes being built the demand for existing property in Newcastle & Lake Macquarie is a driving force for home values.

It is a great idea to have your home appraised every 12 months. Now may be the best time to sell your home?

A free market appraisal takes 15 mins and can give you an update price for your home or investment.

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